Welcome to this web site.Am I being double taxed?? Good question.There is an Accountant who posted in the last 2 or 3 days who saidFREE income advice. Look for her posting.If i come across her posting, I will get back to you.Hopefully other accountants will answer you.LUCKIEST

First of all let me say that I'm not an accountant...just a retired business man. Therefore, the advise I offer should be confirmed with your accountant. (*You DO have an accountant, don't you?)*

I realize this seems a bit confusing. But it's really not.

If you treat the funds that you have used to start your business as a personal loan to your business. There is no tax to your business on the borrowed money. There IS tax on earned income. Therefore, as you earn income, and use part of it to pay back your personal loan, you will pay tax on (NET, not gross) profit.

By March 15th, you must file an "S" corp income tax return. Your personal tax return is separate, but can be sent in at the same time, or a month later. There will be no Tax to your (personal) self on the money that you receive from your business as a paid back loan (since you said it was an interest free loan). If it was not interest free, your (personal) self would have to pay tax on the interest. Of course there IS tax on the salary you pay yourself, and on the business (net) profit.

Incidently; if you treat this as an investment (instead of a loan) to purchase stock; and then if your business later fails, and you (personally) loose money with this investment; you can deduct your losses against any othern personal income (on your personal income tax form.

May I add...If you don't have an accountant, I strongly (*strongly*) recommend that you interview a few and select the one most ideal for you and your business. This is REALLY a necessary business expense. Because you are on a tight budget (as everyone is at start-up), you can probably utilize Quickbooks. If you aren't sure how to set up your accounts, your accountant can advise you. as time goes on, you can adjust these accounts. That way, you can do your own book keeping and use your accountant just for occasional advise, as needed,, and for doing your quarterlies and year-end taxes.

If you W-2 yourself for the entire net profit of the corporation, you would pay more than a sole prop by the total of SUTA and FUTA taxes. However, you will save on SE taxes if your W-2 is less than the net profit from the corp. In addition, you will not pay SE taxes on any employer retirement contributions like a SEP or any self insured health insurance deductions. In the long run, you will pay less in taxes than a sole prop as long as the corp makes enough for you to draw a living wage and some benefits.

Even if you can't get a group plan, you can establish a benefit plan somewhere between Sections 105 and 106 to reimburse yourself for the premiums and take the SE Health Insurance deduction.

I would paste in the Treasury Reg Sec 1.106-1, but trying to paste to this site always freaks out my pop up blocker.

Basically, once the corp earns enough for you to take a salary then you will start making tax deposits at your bank with Form 8109-b or by EFTPS (recommended for convenience). By the 15th of the following month, you will need to deposit the 15.3% FICA + Fed withholding for your payroll the prior month. Once you exceed $50K in total taxes for a year, they will tell you to make deposits more often.

If you keep the books correctly and file a tax return consistent with the books you will not be double taxed. Any investment in the corporation would operate like an investment in any public company. It would not be taxed but you would also not get a deduction for it. It would reside in the equity section of the balance sheet. Any S-corp income after business expenses would be taxable to you on your individual return. You are allowed to take out tax free distributions from the S-corp equal to S-corp income from which you would then theoretically pay the tax and put the rest in your pocket. Be careful that you pay yourself a reasonable salary for the services you provide the S-corp. The reason for this is that s-corp income shows up on your individual return on Sch E and therefore escapes self-employmet tax. IRS will allow that only if they feel your salary is reasonable for your services.

Best advice... get in contact with an accountant. I am a CPA in NY and would be willing to help you with any specific bookkeeping or tax issues.

Search for answers

Ask the community

Most of the time, you just want to find content that has a particular phrase. Here are the easiest ways to find the content you want.

Enclose your search phrase in quotes. Search will try to find content with those words in the order you enclosed them. A search for "marketing advice" is going to return content with the phrase "marketing advice".

Search for content that has certain words, but not necessarily all of the words in order. This is the most basic search. Simply enter your search terms. For example: accept credit cards This will search for documents containing the words accept, credit, and cards

Using OR. The OR operator links two terms and finds a matching document if either of the terms exist in a document. To search for documents that contain either "web design" or just "online marketing" use the query: "web design" OR "online marketing"

Using AND. The AND operator says that the search should return content in which all of the search terms are present. To search for documents that contain both "web design" and just "online marketing" use a search like this: "web design" AND "online marketing"

We would appreciate having your voice in the Small Business Community. You can participate in a number of ways.

Start a discussion in our member-to-member forums. By participating in the Small Business Community, our members gain knowledge and connections that give them a competitive advantage in building a successful business. Take advantage of the collective experience and expertise of the community to get small business ideas and help with a specific question or business challenge.

To post your question in our community, in the “Ask the community” section, from the drop-down, select the category that you’d like to post to, then click the “Start a Discussion” button. If you simply want to introduce yourself to the community, please select the “Introduce Yourself” category.

Note: you must be a logged-in member of the community to post a discussion. Please login or become a member to participate.

Share your small business story. Do you have an interesting story to tell related to your small business? Have some advice for other entrepreneurs to help them avoid some of the pitfalls of small business ownership? We invite you to share your story with the Small Business Community. Click the “Share Your Story” link and simply answer the questions in our Share Your Story template.

Answer a question. Are you an expert in a particular area of running and growing a successful small business? Would you like to help other small business entrepreneurs by answering their questions? We would appreciate your expertise in the Small Business Community. Please click the “Answer a Question” link to see a list of the open questions asked by members of the community.

Bank of America is not responsible for user posts and other user content appearing on this website and does not endorse or guarantee the perspectives, the advice, the users, the businesses, or the products or services sold by any users or businesses that appear on this website.